IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Gross J. |
| Judgment Date | 27 April 2005 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 27 April 2005 |
[2005] EWHC 726 (Comm)
Gross J.
Queen's Bench Division (Commercial Court).
Arbitration — Enforcement — Public policy — Application to adjourn enforcement of award — Provision of security — Nigerian arbitration between Nigerian parties leading to New York Convention award — Defendant applied to set aside award and for stay of execution in Nigeria — Order enforcing award defective in point of form — Whether order enforcing award should be set aside — Whether enforcement should be adjourned on terms — Civil Procedure Rules 1998, r. 62.18(10) — Arbitration Act 1996, s. 103(2)(f), (3), (5).
These were applications (i) by the defendant (“NNPC”) pursuant to s. 103(2)(f) and 103(3) of the Arbitration Act 1996 to set aside an order enforcing a New York Convention award of Nigerian arbitrators; (ii) alternatively, by NNPC to adjourn enforcement of the order, pursuant to s.103(5) of the Act; (iii) by the claimant (“IPCO”), pursuant to s.103(5) of the Act, for security, in the event that NNPC failing on its first application but succeeded on its adjournment application.
Both IPCO and NNPC were Nigerian entities. By a 1994 contract, IPCO, a turnkey contractor specialising in the construction of onshore and offshore oil and gas facilities, agreed to undertake works for the design and construction for NNPC of a petroleum export terminal in the Port Harcourt area of Nigeria and known as the Bonny Export Terminal (BET) project. The contract was to be governed by and construed in accordance with Nigerian law. The contract provided for arbitration in Lagos, in accordance with the Nigerian Arbitration and Conciliation Act 1990 (“ACA”). The total consideration for IPCO's services was a little over US$250 million and it was anticipated that both phases of the BET project (design and construction) would take up to 24 months. In the event, disputes between IPCO and NNPC arose out of or in connection with the contract after the BET project took some 22 months longer to complete than provided for in the contract. The matter proceeded to arbitration and the arbitrators made an award in favour of IPCO in the sum of over $152 million. NNPC had commenced proceedings before the Federal High Court in Lagos to set aside the award and for a stay of execution..
NNPC submitted that the order should be set aside on three grounds. First, the order was defective in that it failed to comply with the requirements of CPR, r. 62.18(10). Secondly, the award had been suspended in Nigeria by virtue of the application before the Nigerian courts to set it aside. Thirdly, the enforcement of the award in the UK would be contrary to public policy.
Held, adjourning the order for enforcement on terms:
1. The order was defective in point of form because contrary to CPR r.62.18(10)(b) it did not contain a statement that the award was not to be enforced until after any application to set aside made by NNPC within the relevant 14 day period had finally been disposed of. The proportionate sanction was to penalise C in respect of the costs thrown away by N in dealing with the premature enforcement proceedings but not to set aside the order.
2. Section 103(2)(f) was only applicable when there had been an order or decision suspending the award by the court in the country of origin of the award. Section 103(2)(f) was not triggered automatically by a challenge brought before the court in the country of origin.
3. There was not the glimmer of an argument that enforcement of the award would offend against English public policy under s. 103(3).
4. NNPC's application before the Nigerian court did have a realistic prospect of success in various respects. In particular there was a measure of concern as to whether IPCO's recovery had been very substantially duplicated. However the NNPC application faced formidable hurdles, not least in moving from well-founded criticism of the tribunal (if such was established) to making good a case of misconduct within s. 30 of the ACA. The award was, in those respects, neither manifestly valid nor manifestly invalid. In all the circumstances, proper deference had to be shown to the pending Nigerian proceedings.
5. Even if NNPC's application in Nigeria was successful, it was common ground that an amount of some US$13 million was indisputably due to IPCO. Moreover success for NNPC on the duplication point was likely to leave IPCO with an award of in excess of US$50 million.
6. Practical justice would best be done by adjourning the enforcement of the order on terms, inter alia, requiring NNPC to pay the US$13 million indisputably due to IPCO and to provide appropriate security in London (and thus free of any domestic constraints) in an amount of US$50 million.
The following cases were referred to in the judgment:
Baker Marina v Danos [2001] 7 NWLR 337.
Deutsche Schachtbau- und Tiefbohrgesellschaft mbH v Ras Al-Khaimah National Oil Co
(DST v Rakoil)UNK [1987] 2 Ll Rep 246.
Ras Pal Gazi v Federal Capital Development [2001] 10 NWLR 559.
Soleh Boneh International Ltd v Government of UgandaUNK [1993] 2 Ll Rep 208.
Taylor Woodrow v Etina-Werk [1993] 1 NSCC 415.
Yukos Oil Co v Dardana LtdUNK [2002] EWCA Civ 543; [2002] CLC 1120.
Ricky Diwan (instructed by Osborne Clarke) for the claimant.
Sam Wordsworth (instructed by Hunton & Williams) for the defendant.
Gross J:
1. On 29 November, 2004, David Steel J ordered, ex parte, that the Defendant (“NNPC”) pay the sterling equivalent of US$152,195,171 and Naira 5,000,000 awarded to the Claimant (“IPCO”) by an arbitration award of a distinguished panel of Nigerian arbitrators, dated Lagos 28th October, 2004, together with interest to date (“the order”, “the award” and “the arbitrators” or “the tribunal” respectively).
2. There are now before the Court the following applications:
(i) An application by NNPC, to set aside the order, pursuant to ss. 103(2)(f) and 103(3) of the Arbitration Act 1996 (“the Act”) (“the application to set aside”);
(ii) In the alternative, an application by NNPC that the enforcement of the order be adjourned, pursuant to s. 103(5) of the Act (“the application to adjourn”);
(iii) An application by IPCO, pursuant to s. 103(5) of the Act, in substance that, in the event of NNPC failing on (i) but succeeding on (ii) above, then NNPC should provide security in the sum of US$50 million (or such other sum as the Court thinks fit), failing which IPCO be permitted to enforce the award as a Judgment of the Court (“the application for security”).
3. In a nutshell, the background is as follows. Both IPCO and NNPC are Nigerian entities. By a contract dated 14 March 1994 (“the contract”), IPCO, a turnkey contractor specialising in the construction of onshore and offshore oil and gas facilities, agreed to undertake works for the design and construction for NNPC of a petroleum export terminal, in the Port Harcourt area of Nigeria and known as the Bonny Export Terminal Project (“the BET Project”). The contract was to be governed by and construed in accordance with Nigerian Law. Clause 65 of the contract provided for arbitration in Lagos, in accordance with the Nigerian Arbitration and Conciliation Act 1990 (“the ACA”). The total consideration for IPCO's services was a little over US$250 million and it was anticipated that both phases of the BET Project (i.e. design and thereafter construction) would take up to 24 months. In the event, disputes between IPCO and NNPC arose out of or in connection with the contract; the casus belli was the fact that the BET Project took some 22 months longer to complete than provided for in the contract. Ultimately, the matter proceeded to arbitration before the arbitrators, who produced the award, now the subject of the applications before this Court.
4. On 15 November 2004, therefore pre-dating the order (of David Steel J), NNPC commenced proceedings before the Federal High Court in Lagos to set aside the award and for a stay of execution. NNPC's applications in the Nigerian proceedings have since been amended and expanded upon. There is also before the Federal High Court in Lagos a notice of preliminary objection, filed by IPCO, alleging that NNPC's application to set aside the award is itself frivolous, vexatious, an abuse of process and calculated to delay enforcement of the award. The Nigerian proceedings are currently pending.
5. At the conclusion of the hearing, I indicated to the parties my decision on the various applications before me. I further indicated that I would give my reasons later. I now do so. I wish at the same time to acknowledge the very considerable assistance given to the court by Mr Wordsworth, for NNPC and Mr Diwan, for IPCO.
6. The framework for the recognition and enforcement of a New York Convention Award is found in ss. 100 and following of the Act. Section 100 provides, insofar as material, as follows:
“(1) In this Part a ‘New York Convention award’ means an award made, in pursuance of an arbitration agreement, in the territory of a state (other than the United Kingdom) which is a party to the New York Convention.
(4) In this section ‘the New York Convention’ means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration on 10th June 1958.”
7. As Nigeria is a state specified by Order in Council under s.100(3) of the Act as being a party to the New York Convention, there can be no doubt (and it was not in dispute before me) that the award is a New York Convention Award.
8. Section 103 of the Act contains the exclusive and exhaustive grounds on which enforcement of a New York Convention Award may be refused. Insofar as material:
“(1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases.
(2) Recognition or enforcement of the award may be refused if the...
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